Myron Samuel Scholes

Scholes, Myron Samuel, 1941–, Canadian-American economist, b. Timmins, Ont., Ph.D. Univ. of Chicago, 1969. He was a professor at the Univ. of Chicago (1968–83) and at Stanford (emeritus since 1996). Along with American economist Fischer Black, Scholes developed (1973) the widely used Black-Scholes formula for pricing stock options, and along with Robert C. Merton, who had influenced their work and extended the formula, Scholes was awarded the Nobel Memorial Prize in Economic Sciences in 1997. (Black's work also was acknowledged by the prize committee, but he died two years before the prize was awarded.) The formula was notable for concluding that no risk premium needed to be factored in, and although it is an approximation that fails to account for the possibility of sharp changes in stock prices it contributed to the growth of the financial markets in the late 20th cent. Scholes subsequently also worked with financial companies, and in the 1990s participated along with Merton in Long-Term Capital Management, a hedge fund whose near collapse in the late 1990s necessitated a Federal Reserve–led bailout and tarnished Scholes's reputation. Scholes has also studied the effects of taxation on asset prices and on incentives and developed a theory of tax planning.